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RNS audit assertions, audit risk, audit data and evidence

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Document your understanding of the relationship between audit risk, audit evidence, and financial statement assertions as it specifically relates to this company and industry.

A. Describe the audit data or evidence your team will review. Why is this proof important? [ACC-411-01]

B. What if a significant portion of the data is overseas and beyond the auditors' jurisdiction or audit universe? Analyze how the audit team will compensate for that risk. What governing rules and regulations must be taken into consideration? [ACC-411-02]

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Solution Summary

Three short paragraphs to give you ideas to get you started on the questions about audit data.

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Audit risk = inherent risk x control risk x detection risk

So the "relationship" is that as risk (inherent or control) go up, detection risk must drop (get more evidence) to compensate for added risk. The industry is in a technical emerging area (IT), in a highly competitive market, and entering a slowdown, raising inherent risk substantially. The client has ...

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Carol Sargent, PhD
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  • MSc, University of Virginia
  • PhD, Georgia State University
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